Down­grade is due to drop in vol­umes

The World Trade Or­gan­i­sa­tion dra­mat­i­cally slashed its fore­cast for trade growth this year by about a third to its low­est rate since 2009, when the global econ­omy was mired in re­ces­sion in the wake of the fi­nan­cial cri­sis.

In an up­date to its fore­casts yes­ter­day, the world’s lead­ing trade body said the groundswell in anti-glob­al­i­sa­tion sen­ti­ment could make mat­ters worse, es­pe­cially if pol­i­cy­mak­ers re­spond to that in a “mis­guided” man­ner.

The Geneva-based WTO, per­haps best known for deal­ing with trade dis­putes, pre­dicted that global trade will rise only 1.7 per cent this year, way down from its April pre­dic­tion of 2.8 per cent.

It said the down­grade was largely due to an un­ex­pect­edly sharp drop in merchandise trade vol­umes in the first quar­ter. Lower eco­nomic growth and trade in de­vel­op­ing coun­tries like China and Brazil as well as a de­cel­er­a­tion in im­ports in North Amer­ica lay at the heart of the sharp down­grade.

If the WTO’s fore­cast comes true, it will be the first time in 15 years that global trade grows more slowly than the world econ­omy, which it ex­pects to ex­pand by 2.2 per cent.

“The dra­matic slow­ing of trade growth is se­ri­ous and should serve as a wake-up call,” WTO di­rec­tor-gen­eral Robert Azevedo said. “It is par­tic­u­larly con­cern­ing in the con­text of grow­ing anti-glob­al­i­sa­tion sen­ti­ment.”

“We need to make sure that this does not trans­late into mis­guided poli­cies that could make the sit­u­a­tion much worse,” he added, re­fer­ring to job cre­ation and growth.

As well as re­duc­ing its 2016 fore­cast, the WTO cut its project for next year to be­tween 1.8 per cent and 3.1 per cent from 3.6 per cent.

The WTO warned of a num­ber of risks, such as the ef­fect of the Bri­tish vote to leave the Euro­pean Union and fi­nan­cial mar­ket volatil­ity stem­ming from changes in mon­e­tary pol­icy in de­vel­oped coun­tries – the US Fed­eral Re­serve is set to raise in­ter­est rates again while the Euro­pean Cen­tral Bank and the Bank of Ja­pan could cut bor­row­ing costs fur­ther.

It also voiced wor­ries that grow­ing anti-trade rhetoric around the world might af­fect trade pol­icy. One planned trade deal that looks to be in trou­ble is the pro­posed Trans-At­lantic Trade and In­vest­ment Part­ner­ship, com­monly known as TTIP, be­tween the US and EU. TTIP aims to re­move trade bar­ri­ers be­tween the two but the se­cre­tive dis­cus­sions have re­port­edly be­come con­cerns – and protests –ß in Europe over what a deal would mean for food safety and pri­vacy pro­tec­tions.